MNI China Daily Summary: Wednesday, April 24

EXCLUSIVE: China’s interbank market liquidity reached a 22-month-high in April, leading the PBOC to net-drain for the second consecutive month, the latest MNI Liquidity Conditions Index showed.

EXCLUSIVE: Beijing will use Hainan as a test bed for economic reform, such as capital account liberalisation, which will help the province reach its 8% GDP growth target this year, before evaluating whether the policies should be rolled out nationwide, a Hainan official told MNI.

POLICY: China’s demand for hot rolled coil steel, a type commonly used in manufacturing, will show a moderate increase in Q2 underpinned by the government's drive for large scale equipment upgrading, Mysteel analysts said on Thursday.

LIQUIDITY: The PBOC conducted CNY2 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The operation has led to no change to the liquidity after offsetting the maturity of CNY2 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.8716% from 1.8324%, Wind Information showed. The overnight repo average decreased to 1.7852% from 1.7937%.

YUAN: The currency strengthened to 7.2460 to the dollar from 7.2466 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 7.1048, compared with 7.1059 set on Tuesday.

BONDS: The yield on 10-year China Government Bonds was last at 2.3250%, up from Tuesday's close of 2.2700%, according to Wind Information.

STOCKS: The Shanghai Composite Index increased 0.76% to 3,044.82 while the CSI300 index rose 0.44% to 3,521.62. The Hang Seng Index increased 2.21% at 17,201.27.

FROM THE PRESS: The People’s Bank of China could use secondary market treasury trading for liquidity management and a reserve of monetary-policy tools, a novel approach compared to the quantitative easing (QE) seen from other developed economy central banks, the PBOC-run newspaper Financial News reported citing an unnamed official. China's treasury bond market has become the third-largest in the world and its liquidity has improved, making it possible for the central bank to carry out bond trading on the secondary market, the official said. China's long-term treasury bond yields, which have fallen recently, will move "within a reasonable range" in line with expected economic growth, the official added.

Policymakers should not relax after the economy's "good start" in Q1, and instead provide further macro support to strengthen the recovery, according to Guan Tao, former official at the State Administration of Foreign Exchange. Guan noted Q1 benefited from low base effects and authorities in future should prioritise a moderate recovery in prices and the real-estate market to stabilise expectations. Consumption recovered better than expected in Q1, but investment needed improvement, Guan added. (Source: Yicai)

China has completed water conservancy construction worth CNY193.3 billion in Q1, a rise of 4.4% y/y, hitting a historical high, Economic Information Daily reported citing the Ministry of Water Resources. There were 23,500 water conservancy projects implemented across the country in Q1, with a total investment value of CNY4.7 trillion, rising 15.8% and 12.3% y/y, the ministry said.